The Canadian dollar continues to dance around resistance, as it follows the lead of its antipodean counterparts. USD/CAD closed at $1.2820 yesterday and declined steadily overnight, erasing all of yesterday afternoon’s gains. Nevertheless, the price action is just noise inside the $1.2765-$1.2830 range that has contained price action since December 4.
The Bank of Canada is expected to leave interest rates and monetary policy unchanged today. There won’t even be a press conference. There is a risk that the statement could focus on downside risks to their outlook, thanks to the second wave pandemic outbreak in Canada. Even so, USD/CAD direction is dictated by broad U.S. dollar sentiment, and at the moment, that sentiment is negative.
AUD/USD surged from $0.7406 to $0.7479, and that move contributed to the USD/CAD selloff. AUDUSD is benefitting from bullish technicals and expectations that for a global economic boom in 2021.
GBP/USD rallied back to $1.3488 after closing at $1.3357 yesterday. Policymakers are putting a positive spin on Brexit negotiations with many sounding positive that a deal will be reached. There are reports that the U.K. is willing to make concessions over-fishing.
German Chancellor Angela Merkel noted that the main stumbling block is regulatory. The European Union wants Britain to maintain regulations around worker rights, taxation, environmental protection, and state aid. Britain is adamant that those regulations are the main reasons why they opted to leave the E.U. in the first place. European Commission President Ursula von der Leyden and U.K. Prime Minister Boris Johnson will have a face to face meeting today.
EUR/USD rallied in Asia, peaked in Europe, then erased the move in its entirety, in early Toronto trading. EUR/USD demand from broad risk-on sentiment is being offset by concerns about the impact of existing coronavirus measures on the Eurozone economy. Traders are also a tad cautious ahead of Thursday’s E.U. leaders meeting.
The Canadian dollar is also benefiting from steady to firm oil prices, although that support may not last. The American Petroleum Institute said weekly crude inventories rose 1.1 million barrels last week, after rising 4.1 million barrels the week before.
FX volumes are starting to dwindle ahead of the seasonal holidays and year-end. There are not any U.S. or Canadian economic reports of note today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
